Dane Work, Re/Max Preferred Properties, Fairfax
“Fairfax is pretty diverse, one end to the other. Herndon, for example, has adjusted for the coming transportation. It’s the buy of the century. Inside the Beltway is absolutely red hot. It’s contracting so quickly, with multiple bids. It’s reminiscent of 2001, 2002. A lot has a lot to do with the school system: it’s a very desirable county and people aren’t hesitant to spend the money.
Inventory, historically, is at 50 percent or less, than what we’re used to at this time of year, [mortgage] rates are at this historic low. It’s the perfect storm for appreciation to go up very quickly.”

The local real estate market is thriving, with Realtors reporting multiple offers on homes in some areas and dwindling inventory of homes for sale. At least two things are contributing to this change in the market.

First, interest rates have been in the basement: Freddie Mac reported a 30-year fixed-rate of 3.57 percent for March this year, as opposed to 3.95 percent in March 2012 and 4.84 percent in 2011 (for reference, March 2005 was 5.93 percent).

Second, home prices are rising: RealEstate Business Intelligence reported a 10.23 percent increase in average sold price in Fairfax County between February 2012 and 2013. Even though inventory is shrinking across the county, distressed sales (foreclosures and short sales) are a smaller part of the market.

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“Distressed sales are down incredibly over the last year, in the county as well as Lorton. In March 2012, they made up 44.4 percent of the market in Lorton. In March 2013: 18.2 percent. Foreclosures only make up 4 percent of that 18.2 percent and 14 percent are short sales. Eighty-two percent are regular sales. A year ago, regular sales were only 55.6 percent. But right now in Lorton, there are only 55 homes on the market. In March of 2012, only 48 houses on the market. Five years ago, in 2008, there were 307 active. That’s huge. That’s crazy. Sales are suffering, there’s just not enough to sell. Lorton still has some negative perceptions because of the prison, even though it’s closed. But once people get here and realize what’s happening, the great parks and trails—it’s one of the fastest growing parts of the county. Except there’s no big scale building being done, not a nice balance of homes being built to keep up with the continued influx to this location. It goes in cycles. A need will create the urgency; it will be corrected and fixed.” - Ron Kowalski, Ron & Susan Associates, affiliated with Re/Max Gateway, Lorton

On the whole, everyone has warm fuzzies about the market.

“It’s as healthy as it’s ever been,” said Dane Work, an associate broker with Re/Max Preferred Properties in Fairfax. “Everything is a hot potato. The whole market is red hot, white hot.”

“Sell. Sell and buy. If you want to move, sell now, buy now. Buying six months ago would be even better, buying a year ago would’ve been even better. But buy. Over the next year, two years, it’s going to be a good market."

— Gerald Hanweck, George Mason University professor of finance

BUT HOW LONG until the extended honeymoon phase is over? And what will that market look like? According to George Mason University professor of finance Gerald Hanweck, a lot like it has before.

“The hype is, fundamentally, what you would expect from a market like this,” said Hanweck. “For quite a while, this has been a terrific housing market in Fairfax County.”

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“A year ago, we were happy to get one good offer. And here we have three. It’s consumer confidence. They’re thinking, everyone’s looking for the bottom. I feel people think we’ve hit the bottom. Every offer I’ve received was full price. Two years ago you’d see properties on the market 30 days or more. Last year that changed to 10 days or so. It’s timing. And price. There is a difference when you’re priced under $600,000 versus over $800,000—it’s strong under six, slower over eight. There’s not many houses in Burke over $1 million. Price makes a difference. We’re not seeing vacancies. We’re seeing good turnover, solid contracts. Short sales and foreclosures are minimizing—it’s mainly standard sales. When you’ve got inventory turning over that quickly and you love the business like I do, it makes it exciting.” - Pat Richter, Residential Preferred Properties, Burke

Hanweck came to GMU in 1985 after spending nearly two decades in the research division at the Federal Reserve Board. Today in addition to teaching MBA finance courses, he is also associate dean for graduate programs.

The professor has seen real estate go through cycle after cycle over the decades. “It really just took time to allow housing prices to get on a path of rising, at a rate they had in the past,” he said.

“When I first came here in 1968, the thought was housing prices should always go up ten percent a year. That was a rule. And in fact they did for some time,” Hanweck said.

“Now we’ve hit a plateau,” said Hanweck, “to where we probably should take off and start having price rises between 4 and 6 percent a year, on average, for residential properties. Once we hit that, and that’s been happening now for several years, prices are high enough — after they had fallen in 2005 and 2006 — that people are willing to buy and sell. Enough time has passed.”

WHY THE DWINDLING SUPPLY? There are several factors, according to Hanweck, which result in people hanging on to their properties. Among them is a gradual increase in the number of retirees in this area who choose to stay in their homes. Another is people simply waiting to see how high prices will rise. There are also more instances of business investors buying properties to rent.

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“Being a bedroom to D.C., Springfield is a commuter’s dream: VRE, buses, etc. It’s an affordable target, more so than Arlington. Though prices have gone up 22 percent since February a year ago (average was $285,635 in 2012, $349,015 in 2013). But we have hardly any inventory, only 41 active listings, 25 attached townhouses. It just breaks my heart. As soon as we get a listing, it’s sold. Just March alone, we had 11 listings, eight have sold. We still have buyers coming in. They’re frantic. They feel like they’re missing the market. And frankly, they are. Multiple markets are being done. It’s absolutely incredible what’s going on. I feel like it’s all over and we didn’t learn our lesson back in 2005. They’re coming out of their short sales, allowed to get loans. They’ve saved their money, have good credit. They’re going conventional; there’s a pecking order. Cash talks.” - Patricia Mancini, Avery-Hess Realtors, Springfield

But none of this should dissuade anyone from jumping into the real estate market right now, Hanweck said. “Sell. Sell and buy.”

“If you want to move, sell now, buy now. Buying six months ago would be even better, buying a year ago would’ve been even better. But buy. Over the next year, two years, it’s going to be a good market. After that we’re going to see federal government cuts actually start to impact.”

“I’m incredibly optimistic,” said Work. “I have been for about a year and a half. It makes me look like a saint. The writing was on the wall for some of this.

“It’s such a great opportunity for the end user, for occupants,” he continued. “Everybody’s got to live somewhere. Now is the time to lock in on something and secure it.”